Secondary market risk

Locked positions can be sold on secondary markets — but at a discount, sometimes a wide one.

Why a discount?

A locked position can't be redeemed for the underlying. A buyer of a locked position is buying:

• Future yield (interest accrual continues).
• A claim on the underlying at lock expiry.
• The lock-bonus differential vs unlocked equivalent.

In exchange, they accept:

• No liquidity until lock expiry.
• Lock-state mechanics on transfer.

The discount is the price the market clears for these constraints.

Empirical reference

Comparable products have traded at 3–12% discounts during stress:

• Lido stETH discount during June 2022 liquidity crisis: 6–7%.
• Convex cvxCRV discount during 2022 stress: 5–12%.
• 4-year locked Curve veCRV equivalents: 3–10% historically.

Banq locked positions are expected to fall in a similar range, with discounts widening during stress and tightening as on-chain liquidity deepens.

When it bites you

• Forced exit. If you need liquidity from a locked position, you sell at a discount. The longer the remaining lock, the larger the discount.
• Liquidation of locked collateral. If your position is partially locked and gets liquidated, the keeper receives locked tokens — they may sell to the secondary market at a discount, eating into the bonus they'd have earned.
• Bootstrap markets. Early on, secondary markets for locked positions may be thin. Discounts may be wide and volatile until liquidity deepens.

When it helps you

• Buying a locked position at a discount is positive expected value if you can hold to expiry. The discount is essentially yield to the holder.
• Cascade protection. The mere existence of a discount-friendly secondary market means cascade dynamics are softer — keepers can sell rather than holding. This is part of the cascade-attenuation story, not a flaw.

Where to go next

• Transfers and exits — how to sell on secondary
• Cascade protection — the systemic context